(Reuters) -General Mills Inc raised its full-year core sales and profit forecasts on Wednesday, encouraged by higher prices and strong demand for the Cheerios maker’s cereals, snack bars and pet food, sending its shares up 3.5% in premarket trade.
The pandemic-driven uptick in grocery demand has held strong, boosting sales at packaged food makers, as people stick to cooking more at home at a time when restaurants have bumped up menu prices to offset inflation.
The sustained demand, coupled with price hikes across the board, helped Minnesota-based General Mills report a better-than-expected quarterly profit like its peers Kraft Heinz and Kellogg.
Margins, however, remain pressured across the food industry as pandemic-induced supply chain shortfalls have led to soaring freight and labor expenses, adding on to spiraling costs of packaging material and ingredients such as grains, meat and edible oils.
General Mills, known for Betty Crocker cake mixes and Old El Paso sauces, said its third-quarter gross margin fell to 30.9% from 34.4% a year earlier.
The company also missed market estimates for quarterly sales as supply snags affected its refrigerated dough, pizza and hot snacks categories in North America.
General Mills expects double-digit input cost inflation in the current quarter and 8% to 9% inflation for the full year, but said it was “close to fully covered” on its ingredients and packaging material requirements for fiscal 2022.
The company now expects organic net sales to rise by about 5% in fiscal 2022, compared with its prior estimate of a 4%-5% increase.
It forecast adjusted per-share profit between flat and an increase of 2%, compared with its earlier range of a 2% decline to a 1% rise.
Excluding one-time items, General Mills earned 84 cents per share in the quarter ended Feb. 27, beating analysts’ average estimate of 78 cents.
(Reporting by Deborah Sophia and Mehr Bedi in Bengaluru;Editing by Vinay Dwivedi)
